Royal Bank of Scotland has rated Indian banks as 'neutral' as against the earlier rating of being 'overweight'. The rating has been given keeping in view the upcoming pressure that the banks are likely to face seeing the dipping trend in net interest margins (NIMs), slow rate of growth and increasing costs.

"We think the slowdown of GDP growth and high interest rates will start taking a toll on Indian banks' earnings in FY3/12, which will be reflected in a slower loan growth (around 15-16%), higher non-performing loans and, thus, lower earnings growth," read a report by RBS.

Amongst the ten banks which declared their yearly earnings, with the exception of Indian Overseas Bank, all other lenders posted a slow credit growth by 22% on y-o-y basis.

IOB's loan book however showed 43.6% growth in y-o-y terms.

The loan book of Axis Bank dipped from 36% in the last fiscal to 21% this time.

Also provisioning for bad loans has been quite high for some banks owing to strict RBI standards set.

The credit growth as projected by RBI for this fiscal has been revised to 18% from 19% earlier.